The Long- Run Aggregate Supply Curve Is Vertical at $12

question 340

Multiple Choice

The long- run aggregate supply curve is vertical at $12 trillion but the short- run aggregate supply curve intersects the aggregate demand curve at $13 trillion. We know that

• A) the economy is producing below full employment in the short run, and will adjust by hiring more workers, thus decreasing unemployment.
• B) adjustments will occur so that the long- run aggregate supply equals $13 trillion.
• C) adjustments will occur so that the short- run aggregate supply eventually intersects the aggregate demand curve at $12 trillion.
• D) the price level is too high. The long- run equilibrium will occur with a lower price level.

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating how much of additional income will be taken in taxes.

Beta

A measure of a stock's volatility or risk as compared to the overall market, indicating how much the stock’s price is expected to move relative to market movements.

Coupon Rate

The annual interest rate paid by a bond issuer to its bondholders, usually expressed as a percentage of the bond's face value.

Capital Structure

The mixture of debt and equity financing a firm uses to fund its operations and growth.